Administration Fees

[Guest lschaab]

An employer group passes along the cost of administration of its entire benefit package (which is outsourced to a TPA) to employees, can the fee be payroll deducted pre-tax? Can it be identified as a separate line item, or does it have to be 'built in' to a specific benefit?

[Guest CRobinson]

Actually, that's exactly how we handle it. The fee is pre-tax and is indicated as a separate line item (for most of our clients).

[KIP KRAUS]

What kind of fees and to which coverages do they apply?

[mbozek]

Admin costs which are regarded as settlor expenses cannot be passed through to participants or the plan. Mere fact that that the er hires a TPA does not mean that all costs can be passed to participants. DOL has issued opinion letter on which expenses can be passed along to participants. Check DOL website.

Second-- Are the costs passed through on a pre tax basis regarded as part of the employee limits under 402(g)? I dont understand the meaning of the term "pre tax".

Third: Does the plan permit this pass along of expenses and has it been disclosed to employees in the SPD or other materials? If not ipass along is in violation of ERISA.

[Guest lschaab]

Thanks everyone for all the dialogue on my question. I am not familiar with what a settlor expense is, or limits under 402(g). Can you explain or direct me to where I will find a discussion on those items? The administrative fee is the same for all employees regardless of the benefit(s) they have chosen. Fee covers administration fee covers the cost of billing, reconciliation, maintenance (processing new hires, changes and terms), FSA administration (if selected by ee) and COBRA.